Hey all,
I'm a self-funded searcher looking for some valuation and deal structure input. I'm looking at a landscaping business and seeing EBITDA multiples in the 2-3x range for most deals this size. I'd say this company is a bit top-heavy from a staffing perspective, and while this is impacting the current profitability numbers, I think they have the right folks in place to scale quite a bit beyond the current revenue.
The seller is looking to land in the###-###-#### 5x range, he has had feedback this is high, including from his sell-side broker, so me coming back with the same won't be a shock. The seller is open to seller financing (not sure how much yet) and a creative deal structure. I thought an earnout could work given some fairly aggressive projection numbers, until I read about how complicated earnouts can be to manage.
The deal isn't SBA qualified yet (though I think that is an option at a reasonable multiple). I am going to look into an equipment loan, and I have the necessary funds to meet the SBA equity requirements, even at the higher multiple. There are a bunch of reasons the company works well for me, including proximity, industry knowledge, and a strong management team that have me wanting to make this work, if possible.
The owner wants to benefit from some of the firm's unrealized upside, and I believe it could be there, but I also don't want to shoulder all of the risk, The broker has asked for me to sketch up a price and deal structure to socialize with the seller as a next step. I'd like to come back to him with a multiple I think is fair to both sides, and a structure that allows the owner to benefit from future growth, but not at the risk of overly constraining current cash flow. I'd love folks thought's on how they approach this question and how what elements could make the deal work.
$3.6M rev, 450k EBITDA landscaping deal valuation and structure
by a searcher from Georgia Institute of Technology
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I know you are going to hate hearing this. you need to offer the seller what the business is worth based on financial history and if they dont like that you walk away. There are thousands of other businesses for sale. I know you want this one...and you want the search to be over and just be in your new business. Dont make this mistake. This business is worth 1.5m. If the seller wants to realize a higher value then they can stay in the business longer and grow it themselves.
If you take the advise above and structure and earn out or a 100% seller finance note...then you have the seller hanging around in the business and they become your new landlord that you own payments too.
Tread carefully